Redflex Traffic Systems' Chicago offices. The company was considered a top contender for the controversial new speed camera program. (John J. Kim)

Accusing Chicago's red-light camera vendor of covering up a 2-year-old breach of ethics until a Tribune investigation brought it to light, Mayor Rahm Emanuel's office on Tuesday threw out the company's bid for a lucrative new speed camera contract.

The city also raised serious doubts about the future of Redflex Traffic Systems Inc.'s role as the longtime operator of Chicago's red-light camera program that since 2003 has generated some $300 million in fines for the city and $97 million in revenue for the publicly traded company, according to city records.

The decision to label Redflex ineligible for the pending city contract came two days after a Tribune report detailed how the company improperly paid a $910 luxury hotel tab for the city official who oversaw its program and disciplined one of its own top executives but failed to tell the city about the 2010 incident until this month. The company also did not disclose its internal investigation of broader questions about the company's relationship with the city official.

"I find that Redflex's failure to timely report this incident to the city is unacceptable behavior and is a failure by Redflex to act in the city's best interest," Jamie L. Rhee, Emanuel's chief procurement officer, said in a letter sent to Redflex on Tuesday.

"It appears that a Redflex employee in a management position over a city contract violated, at a minimum, the city's ethics law, Redflex violated the city's ethics laws, and that Redflex in effect covered the matter up by failing to report it to the city for a period of two years," Rhee said in the letter.

In a statement issued late Tuesday by its Chicago public relations firm, the company said it accepts full responsibility for the hotel incident and has adopted sweeping internal reforms.

"Redflex determined this was, while regrettable, a single isolated incident," the company statement said. "We take the public's trust very seriously and apologize for this lapse."

Redflex, which won its current business under previous Mayor Richard Daley but also has ties to key Emanuel political allies, was considered a top contender for the controversial new camera program pitched by Emanuel as a way to protect schoolchildren from speeding motorists. Critics labeled it a money grab for a cash-starved city.

The swift rebuke by the mayor allows him to distance himself from the political criticism while potentially preserving the timeline of a November rollout for the new program, which Emanuel is counting on for up to $30 million in next year's budget.

The stakes may be even bigger for Redflex, which is bidding for other contracts in cities throughout the country, from Tacoma, Wash., to Baltimore, where the company is among three finalists for that city's speed camera program.

The company's current Chicago business is the largest camera enforcement program in the world, according to Redflex. But that also may now be in question, pending an investigation by city Inspector General Joseph Ferguson.

The inspector general's office is looking at much broader allegations of wrongdoing involving the company's relationship with the former city manager in charge of the red-light program, said Sarah Hamilton, Emanuel's chief spokeswoman.

Those allegations center on John Bills, the former managing deputy commissioner in the city Transportation Department, and a Redflex contractor from Bills' Chicago neighborhood who received more than $570,000 in commissions since the red-light program began. Both men have told the Tribune they have done nothing improper.

Redflex officials acknowledged the company paid for a two-day stay for Bills at the Arizona Biltmore. But they said an internal probe by a law firm discounted the broader allegations. Those allegations were made in an Aug. 24, 2010, letter — obtained by the Tribune — written to the board of Redflex's Australian parent company by a former company executive who was under internal investigation for substantial abuse of a company expense account.

In an interview last week, Redflex's general counsel Andrejs Bunkse told the newspaper its "exhaustive" probe of expense reports found only one improper expenditure for Bills, and as a result, the company overhauled its expense reporting policies and sent the executive vice president involved to "anti-bribery training." Bunkse said it was an "oversight" to not report the investigation or its findings to the city in 2010.

The company notified the city Board of Ethics of the investigation and its actions this month, after the Tribune's inquiries.